Educational Articles

Déjà Revenue

Robert Harrington
| April 15, 2012

You don’t need to enlist the help of a studio executive to tell you that audiences didn’t exactly flock to the theaters in 2011. Just ask a friend, or a neighbor, or the next stranger you bump into on the sidewalk how many times he/she went to see a movie in the past year. Attendance levels hit rock bottom, the lowest since 1995. Marquees were overpopulated with remakes, rehashed franchises, and altogether tasteless comedies, of which only a handful were memorable. Even the Academy of Motion Pictures, Arts and Sciences had to go to France to find a film deemed worthy enough to award its “Best Picture” Oscar – The Artist, a silent film, was a nostalgic look back to nearly a century ago when the old studio system had a stranglehold on its actors and finances and, as the film would have you think, everything was just better. So it should come as no surprise that perhaps the most promising harbinger for the future of the movie industry came in the form of a nearly two decade-old animated coming-of-age picture.

Before Walt Disney (DIS - Free Disney Stock Report) released The Lion King in 3-D on September 16, 2011, critics, analysts, and audiences alike had questioned whether or not a 17-year-old animated movie beckoned dishing out the premium price for tickets when many already owned a version of the film on DVD or Blu-Ray. Within a weekend that tone changed in a big way, as The Lion King grossed over $30 million in its opening four days, good for number one at the box office and the fourth-highest September gross ever in the typically droll post-summer box office hangover. And, as the picture eventually scored a combined domestic and foreign gross of nearly $170 million, it came as no surprise when Disney and Pixar announced a plan to re-release four more films from its vault in 3-D formats through 2013: The Beauty and the Beast, Finding Nemo, Monsters, Inc, and The Little Mermaid.

The 3-D format, pioneered by RealD Cinema (RLD), has yet to transform the movie industry in the way many insiders had hoped. Spurred by the success of James Cameron’s Avatar in 2009, studios rushed to release more films with the extra dimension. But what resulted was an oversaturation of CGI-enabled films about explosions and swear-words, while the only lasting 3-D image for many moviegoers was usually an airborne speck of debris that fluttered from the screen and dissolved somewhere between the clumsily bespectacled viewer’s cornea and eyelid. Even Martin Scorsese failed to fully validate the format with his visually dynamic Hugo which, as of this article’s writing, had just barely surpassed its $160 million budget.

What Disney saw in The Lion King, and what many studios will likely soon realize, is an untapped revenue stream sitting right under their nose in the form of film libraries. That is, if a two-hour movie only costs roughly $4 million to convert to 3-D, then the opportunity to reap profits through re-releases is undeniable. This is especially helpful in the lagging periods following the summer and holiday seasons, during which the most surefire blockbusters are screened, when companies struggle to post satisfactory earnings. Tellingly, Disney has laid out the re-release schedule for its re-mastered films to seize profits in the dead zones of the movie year. Moreover, Monsters, Inc. is set to open on January 18, 2013, a mere five months before its long-awaited prequel, Monsters University, premieres in North America. The re-release will offer the studio a chance to market to and engage with a new generation of moviegoers that no amount of teaser trailers or viral advertising could ever hope to achieve.

By combining the magnified experience of seeing a film in 3-D with the shared nostalgia attached to older, classic pictures, the trend of re-releases seems to be breathing fresh air into the left-for-dead cache of the technology. Content owners, like Viacom (VIA/B) and Sony (SNE), stand to benefit from the renewed interest in their film catalogs. RealD and other companies invested in the success of the innovation are eager to see the 3-D form really take shape. Theater and technology company IMAX (IMAX), whose standard-bearing digital projectors and screens have led to better-than-expected earnings in recent months on the heels of the latest Harry Potter and Mission: Impossible films, is a probable benefactor. The uptick in 3-D re-releases will likely aid theater companies, which suffer through the dreary in-between months while placing increased importance on their summer and holiday releases, the most. Among them, Cinemark Holdings (CNK) and Regal Entertainment (RGC) have been more than vocal on their campaigns to convert the majority of their screens to better host 3-D films.

But, as the studios did with new releases after Avatar, there runs a risk of oversaturation. Conversely perhaps, James Cameron’s most recent dive into 3-D territory may be a litmus test for the immediate future of non-Disney participation in re-releases when, on April 6th, his beloved Titanic was resurrected in the digital format. Through its first five days of release, the romantic epic had grossed over $25 million (against a reported $18 million conversion budget), a more-than-respectable figure given its 190 minute run-time and a crowded Easter weekend marquee. The effects of this early success may soon resonate with other strapped-for-cash studios looking to impatiently reap in the benefits of Mr. Cameron’s command of the medium. That is to say, don’t be surprised if Dances with Wolves in 3-D is on a big screen near you in the coming months. After all, Top Gun is scheduled for a re-mastered release in late 2012.

At the time of this article’s writing, the author did not hold positions in any of the companies mentioned.